From creditor to debtor: Nigeria’s long descent from oil wealth to borrowing nation

...Lent $240m to World Bank in 1974; $120m to IMF in 1975 In the mid-1970s, Nigeria occupied a position few developing countries could boast of. Flush with oil revenues and rising foreign reserves, the country was not seeking financial assistance from international institutions; it was helping to finance them. In 1974, Nigeria invested $240 million in World Bank bonds, effectively providing resources that the institution could deploy for development projects across the world. A year later, it contributed $120 million to the International Monetary Fund’s Oil Facility, a programme established to help countries struggling with soaring oil prices. At the time, Nigeria was emerging as a regional power, funding peacekeeping missions, supporting liberation movements in Africa and providing assistance to neighbouring countries. The country was so wealthy that General Yakubu Gowon was famously quoted as saying that Nigeria’s problem was not money, but how to spend it. Five decades later, that statement reads like a relic from another era. Nigeria is now heavily dependent on borrowing to finance its budgets and development plans. According to the Debt Management Office, the country’s public debt rose to N159.28 trillion by the end of 2025. The 2026 federal budget earmarks about N15.8 trillion for debt servicing alone, an amount that exceeds the combined capital budgets of several key sectors. The transformation from creditor to debtor raises a troubling question: what happened? The answer lies not in a single event but in decades of missed opportunities. The oil boom of the 1970s created enormous wealth, but it also encouraged a dangerous dependence on crude oil. Agriculture, which had been Nigeria’s leading export sector before oil, gradually declined. Manufacturing struggled to compete, while successive governments relied increasingly on oil revenues to fund public spending. When global oil prices collapsed in the early 1980s, the weakness of the economy became exposed. Government revenues fell sharply, foreign exchange earnings dwindled and borrowing began to replace oil income as a source of financing. Rather than use the crisis to diversify the economy, successive administrations largely continued the pattern of dependence on oil. Periods of high oil prices brought temporary relief, but they were often accompanied by higher government spending rather than long-term investments that could generate sustainable growth. The return to democracy in 1999 offered another opportunity for economic renewal. Rising oil prices during the 2000s generated billions of dollars in additional revenues. In 2005, Nigeria secured debt relief from the Paris Club, eliminating about $18 billion in external debt and providing what many economists described as a fresh start. Read also: FAAC disburses N2.55trn to federal, state, local govts, as federal account revenue hit N4.5trn in June Yet the country soon returned to borrowing. Related News FG’s long embargo on employment raises concerns, queries Beyond the rescue: How weak local governance fuels insecurity in rural communities Tinubu's same-faith ticket reignites debate across Northern Nigeria ahead of 2027: The problem was not necessarily the loans themselves. Every major economy borrows. The critical issue is how borrowed funds are used. In countries where debt finances productive infrastructure, industrial expansion or technological development, borrowing can stimulate growth and generate the resources needed for repayment. In Nigeria, however, the outcomes have often been less visible. Despite decades of borrowing, many roads remain in poor condition, electricity supply is inadequate, public schools are underfunded and healthcare infrastructure remains weak. While some debt-financed projects have improved transportation and connectivity, the overall impact has fallen short of public expectations. Corruption has also played a significant role. For years, anti-corruption agencies have uncovered cases involving billions of naira in stolen public funds. Yet convictions are often delayed, assets are not fully recovered and many high-profile cases end with plea bargains. The perception that public officials can loot state resources with limited consequences has undermined confidence in governance. Transparency International’s Corruption Perceptions Index continues to rank Nigeria among countries facing significant governance challenges, reinforcing concerns about accountability in public finance. The consequences are evident in today’s fiscal reality. A growing share of government revenue is spent servicing existing debts rather than building new infrastructure or expanding social services. At the same time, inflation, unemployment and poverty continue to affect millions of Nigerians. Citizens are increasingly asking why rising public debt has not translated into a comparable improvement in living standards. Yet debt is only a symptom of a deeper problem. The real issue is the inability of the economy to generate sufficient revenue outside oil, combined with persistent inefficiencies in public spending. Nigeria’s population has grown from about 56 million in 1970 to more than 230 million today, placing enormous pressure on infrastructure, education, healthcare and employment. The country still possesses significant advantages. It has vast oil and gas reserves, fertile agricultural land, a large domestic market and a youthful population. What has been lacking is the consistent policy framework needed to convert those assets into broad-based prosperity. Nigeria’s journey from lender to borrower offers a lesson in economic management. Natural resources alone do not guarantee development. Wealth must be invested productively, institutions must be strengthened and public resources must be managed transparently. Half a century ago, Nigeria was helping to fund global financial institutions. Today, it relies on many of those same institutions for support. Taofeek Oyedokun Taofeek Oyedokun is a correspondent at BusinessDay with years of experience reporting on political economy, public policy, migration, environment/climate change, and social justice. A graduate of Political Science from the University of Lagos, he has also earned multiple professional certificates in journalism and media-related training. Known for his clear, data-driven reporting, Oyedokun covers a wide range of national and international socioeconomic issues, bringing depth, balance, and public-interest focus to his work.